‘Petroleum,’ ‘oil’ and ‘fossil fuels.’ What’s the difference? And what about gas?

Oils of many different kinds can be extracted from minerals, plants and animals. This website uses ‘oil’ as shorthand for what is, properly speaking, ‘petroleum.’ We also track the exploration and production of Uganda’s ‘natural gas.’

Petroleum, natural gas and coal are the world’s main fossil fuels. They are called ‘fossil’ fuels because they were all formed, hundreds of millions of years ago and in processes

Oils of many different kinds can be extracted from minerals, plants and animals. This website uses ‘oil’ as shorthand for what is, properly speaking, ‘petroleum.’ We also track the exploration and production of Uganda’s ‘natural gas.’

Petroleum, natural gas and coal are the world’s main fossil fuels. They are called ‘fossil’ fuels because they were all formed, hundreds of millions of years ago and in processes that lasted many millions of years, by the compression and heating under the earth’s surface of what was once living matter: plants, plankton, and other living organisms. The element carbon is fundamental to all forms of life and carbon compounds are the energy source of these fuels formed from living matter. An unfortunate side effect is that burning the fuels produces not only energy but also gaseous carbon emissions which, it is now almost universally agreed, are leading to global climate change.

Surface coal has been burned as a fuel in some parts of the world for at least two thousand years, but its use did not become widespread until the 18th and 19thcenturies when it powered the European industrial revolution and, notably, the steam engine. It went on to become the major fuel for electricity generation.

Petroleum products from surface sources and shallow wells were also used—as tar for roads and kerosene for lighting—by ancient civilisations in the Middle East, Persia, China and Japan. During the West’s industrial revolution kerosene was again distilled for lighting, but was later displaced by gas derived from coal and then by electricity. Just as coal mining was spurred by the invention of the steam engine, petroleum production was spurred by the invention of the internal combustion engine to drive vehicles, making it a key energy resource throughout the 20th century. (Confusingly, the refined petroleum fuel used to drive cars is known in British English as ‘petroleum spirit’ or, more commonly, ‘petrol’; but in American English it is called ‘gasoline’ or ‘gas.’) Mass production of these fuels led to the development and uptake of many other petroleum products, from asphalt for highways to petrochemicals with numerous applications in the solvents and plastics industries.

‘Natural gas’ is in fact a variable mixture of gases—predominantly methane—frequently found close to deep coal and petroleum deposits. It is more environment-friendly than other fossil fuels, burning more cleanly and with lower emissions, but proved much harder to extract and transport. According to the American educational website, www.naturalgas.org, some surface gas was tapped in China, using bamboo poles, 2,500 years ago, and burned to heat water. Efforts were made in the 19th century USA to tap naturally occurring gas for lighting, but most gas used for lighting at that time was manufactured from coal. Natural gas production did not begin in earnest until the 1950s, when drilling, pipeline and storage technologies had improved.

Even as natural gas fields were developed, however, ‘surplus’ gas found in oil wells was generally released into the atmosphere or burnt in ‘gas flares.’ This has since become a hot environmental topic, and flaring has reduced substantially in many oilfields, but it is still widespread in Nigeria and Russia.

Is the world running out of oil? (And will this mean that Uganda gets a good price for it?)

Oil is a finite resource, but global consumption of it has increased steadily for most of the last 100 years. Some people believe that we have already passed the point—known as ‘peak oil’—where more than half of the world’s total oil deposits have been used up, and that it will get ever harder to extract the remainder. This, they say, is likely to have dramatic consequences for the global economy. Oil prices will climb steeply and competition for the remaining resources will become fierce. And, with present global consumption rates of around 85 million barrels of crude oil per day, this will start to happen very soon—within the next ten years.

Some economists and oil industry experts, however, dismiss these arguments as scaremongering. They say that new reserves are still being discovered and that improved technologies are making it possible to extract oil from places that were once impossible to reach. They also point to fact that global oil consumption has actually declined slightly over the last couple of years, despite the rapid growth of economies such as India and China, in part because of improved efficiencies in its use. And, some say, high oil prices drive innovation in technology and efficiency.

Others believe that, as oil resources are depleted, the world’s energy needs can be met by an alternative source of hydrocarbons—oil shale. This is a kind of rock that, with emerging industrial technologies, can be burnt in furnaces to produce electricity and processed into a fuel to drive engines. (Critics point, however, to the high financial and environmental costs of these processes.) The world is thought to contain abundant oil shale reserves, equivalent to around three trillion barrels of oil. About two thirds of those reserves are located in the United States of America. If large-scale shale oil processing does begin, this could entirely change the USA’s relationships with the Middle East and, indeed, the rest of the world.

What does all this mean for the price of Uganda’s oil? It depends who you listen to, and is impossible to say with any degree of certainty. Many economists believe that the days of cheap oil are over forever, and that the world market price (currently ranging from around USD 102 to USD 120 per barrel of crude, depending on the type) is unlikely ever to drop much below USD 100 per barrel. But on current projections Uganda’s oil—depending, of course, on the rate at which it is extracted—is likely to last for 20-30 years, and a lot could happen within that time. Major new oil discoveries elsewhere, or significant breakthroughs in oil shale processing technologies, could drive the oil price down. Ugandan policymakers should be ready for all eventualities.

that lasted many millions of years, by the compression and heating under the earth’s surface of what was once living matter: plants, plankton, and other living organisms. The element carbon is fundamental to all forms of life and carbon compounds are the energy source of these fuels formed from living matter. An unfortunate side effect is that burning the fuels produces not only energy but also gaseous carbon emissions which, it is now almost universally agreed, are leading to global climate change.

Surface coal has been burned as a fuel in some parts of the world for at least two thousand years, but its use did not become widespread until the 18th and 19thcenturies when it powered the European industrial revolution and, notably, the steam engine. It went on to become the major fuel for electricity generation.

Petroleum products from surface sources and shallow wells were also used—as tar for roads and kerosene for lighting—by ancient civilisations in the Middle East, Persia, China and Japan. During the West’s industrial revolution kerosene was again distilled for lighting, but was later displaced by gas derived from coal and then by electricity. Just as coal mining was spurred by the invention of the steam engine, petroleum production was spurred by the invention of the internal combustion engine to drive vehicles, making it a key energy resource throughout the 20th century. (Confusingly, the refined petroleum fuel used to drive cars is known in British English as ‘petroleum spirit’ or, more commonly, ‘petrol’; but in American English it is called ‘gasoline’ or ‘gas.’) Mass production of these fuels led to the development and uptake of many other petroleum products, from asphalt for highways to petrochemicals with numerous applications in the solvents and plastics industries.

‘Natural gas’ is in fact a variable mixture of gases—predominantly methane—frequently found close to deep coal and petroleum deposits. It is more environment-friendly than other fossil fuels, burning more cleanly and with lower emissions, but proved much harder to extract and transport. According to the American educational website, www.naturalgas.org, some surface gas was tapped in China, using bamboo poles, 2,500 years ago, and burned to heat water. Efforts were made in the 19th century USA to tap naturally occurring gas for lighting, but most gas used for lighting at that time was manufactured from coal. Natural gas production did not begin in earnest until the 1950s, when drilling, pipeline and storage technologies had improved.

Even as natural gas fields were developed, however, ‘surplus’ gas found in oil wells was generally released into the atmosphere or burnt in ‘gas flares.’ This has since become a hot environmental topic, and flaring has reduced substantially in many oilfields, but it is still widespread in Nigeria and Russia.